Ford and GM case study

2227 Words May 23rd, 2006 9 Pages
Q: 1 Why are Ford and GM entering the Russian car market now? Why did they not invest earlier, and why do they do not postpone investment until the market is bigger?

For any company going out for the foreign market is because of any one out of globalization, reducing tariff all over the world, to increase the market share, saturation of the local market, for getting the economies of scale of production, to use their excess capacity and use the resources where it is available at law cost.

The several factors for the Ford and GM moved to Russian market, out of above mentioned are as follow:

- The demand for cars and light commercial vehicles remained relatively stable prior to, and implementation of market reforms in 1992, For example as
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First the licensing may result in a firm's giving away its know-how that is giving away his competitive advantage to the competitor in the foreign market. Suppose Ford gives license to AvtoVAZ, one of the large Russian manufacture then it can start its own car manufacturing using Ford's know how. Second disadvantage is providing the license to the company there is no tight control over the subsidiary firm in foreign market. Ford wants to exploits the opportunity that it has in Russia by its own way. Licensee may not follow all instruction of Ford. The last problem with the giving license is that some terms of know-how can not be defined on a page or documented. Like service industry (Hospitality industry) that how to license the subsidiary for "how to well come and how to greet" as a part of the service.(Hill, 2003,p-215).

Since there is a vast opportunity for Ford as a first mover advantage it want to make sure of the 100% command over its operation in Russia. This may be the reason why it started its fully owned subsidiary.

Q: 3 Why do you think GM chose to establish a joint venture with AvtoVAZ, rather than a wholly owned subsidiary? What are the risks associated with GM's joint-venture strategy?

GM enters into the Russian market immediately after the Ford entered. But it has decided to go with Joint

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